A technical recession in an economy is often defined as two consecutive quarters of economic decline. So, has the covid-19 crisis put us into a recession here in Canada? Technically not at this point or at least it hasn’t been determined whether or not we are in a recession as by the time that determination is made the recession would have already started. With that being said, I don’t think there is any way that Canada avoids a recession in 2020 and in my opinion we have entered it already. According to Stats Canada, the economy shrunk by 9% in March related to the shutdowns associated to covid-19. But is any of this all that surprising given the situation we are facing? Not really, but the more important question to be asking is how long will this last? That is the million-dollar question that all investors are trying to figure out.
According to the IMF (International Monetary Fund), the Canadian economy will shrink by 6.2% in 2020. If they are correct, then that would mean anyone hoping for a quick enough recovery to get us back to level by the end of the year, it’s looking unlikely. The IMF has also predicted that we will see a 4.2% recovery next year but admits it is extremely difficult to make predictions right now as a lot of uncertainty remains. If their predictions are true again, that would mean that we don’t recover until 2022 at the earliest. So, how do I sleep at night knowing just how challenging the economic challenges are going to be?
To begin with, I always take predictions with a grain of salt especially at a time like we are experiencing. Although interesting to read, economic predictions and forecasts are rarely accurate in reality because there are simply too many unknown factors which can play a part. In the current environment, it remains to be seen how quickly our economy will be able to pick up steam, or how slowly for that matter. It remains to be seen what other events which have not yet happened can influence growth on a negative or positive side. So I take these things again with a degree of interest but caution as well. Additionally, this doesn’t mean that we will be in a recession for two years either as even under current predictions, economic activity will start to improve again later this year. What most people are concerned about is what does this mean for their investment portfolio as well. As we have seen in recent weeks, when markets have been climbing, the financial markets and the economy are not the same thing. The markets are a forward-looking measure of what people are willing to pay for future growth of an investment while economic indicators are always backwards looking and evaluate what has happened. Therefore, if people believe that an asset today will be worth more in the future then it is likely the markets will increase, and your holdings will increase. The recovery in the stock market generally happens before the economy turns the corner and often occurs before the general public realizes it. In essence, we may be through it before you even know it.
The recession word often gets thrown around a lot especially during times of economic strain and it can be scary to the general public. It’s always important to keep these things in perspective and to stay patient. This isn’t the first recession we have seen, it won’t be the last and before it has been made public that it has ended, it will have already been done for likely some time.
Covid-19 Notes: I have been so inspired by the businesses who are doing what they can, even during an economic slowdown to support those in our community who are less fortunate or our essential workers operating on the frontlines. I want to continue to acknowledge them in hopes that we will choose to support them post crisis and reward them for being great community citizens. I can’t get to them all so please reach out to me and share businesses which you know are answering the call as well.
Duha Group– A good friend of mine recently posted on Facebook that Duha Group will be raising money for the Health Sciences Centre Foundation to support buying hand sanitizer to fill the void of lower supplies they are experiencing. Additionally the foundation has provided iPads and phones to people living in intensive care so that they can continue to communicate with their family.
Community Shirt- Community Shirt was formed by a group of friends to help raise money for Winnipeg Harvest, a local food bank which supplies many programs and individuals throughout Winnipeg. In just over a week of t-shirt sales, with all proceeds going to Winnipeg Harvest, Community Shirt raised $12,500 which was matched and ultimately contributed $25,000 in total. Amazing!
Sherpa Marketing-Our friends at Sherpa Marketing came up with their Adopt a Business program where they are offering businesses in Winnipeg and in Kitchener a $25,000 marketing package to help get them through the challenges they are facing as a small business. Getting small businesses back on their feet is going to take an incredible effort but with the support of other businesses and our governments we can get them there. Great work from Sherpa!
-Grant White, CIM®, CFP®
Grant White is a Portfolio Manager/Investment Advisor at Endeavour Wealth Management with Industrial Alliance Securities Inc, an award-winning office as recognized by the Carson Group. Together with his partners he provides comprehensive wealth management planning for business owners, professionals and individual families.
This information has been prepared by Grant White who is a Portfolio Manager for Industrial Alliance Securities Inc. (iA Securities) and does not necessarily reflect the opinion of iA Securities. The information contained in this newsletter comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on an analysis and interpretation dating from the date of publication and are subject to change without notice. Furthermore, they do not constitute an offer or solicitation to buy or sell any of the securities mentioned. The information contained herein may not apply to all types of investors. The Portfolio Manager can open accounts only in the provinces in which they are registered.